Legislature stays the course, preferring market mechanisms for GHG goals – for now

Given the choice between a cost-effective market approach to reduce greenhouse gas (GHG) emissions, and more expensive command-and-control regulations, the Legislature so far is sticking with the market. This is good news for business operators, ratepayers and drivers, but the impulse to regulate is never far from the legislative mind set.

Nobody doubts California’s commitment to global climate change leadership and its dedication to reducing greenhouse gas (GHG) emissions.

Two governors (of different parties) and nearly two decades of legislating have produced landmark legislation setting ambitious GHG reduction goals. Since the first goal was established in 2006, state leaders have wrestled with implementing strategies, resulting in an awkward mix of command-and-control and market mechanisms.

Since the more recent (and far more stringent) goal was adopted in 2016 (SB 32, Pavley), requiring by 2030 a 40 percent reduction in GHG emissions below 2020’s already-restricted levels, state leaders seem to be favoring the marketplace as the preferred method for reducing global warming gases.

In 2017, the Legislature adopted AB 398 (E. Garcia), which created an economy-wide cap-and-trade system to price GHG emissions. Lawmakers rejected a competing attempt to meet the goals through direct regulation, and preempted local air management districts from imposing their own GHG regulations

In 2018, legislation proposing draconian command-and-control measures has stalled.

  • A bill to ban new registrations of cars with internal combustion engines, beginning in 2040, was pulled by the author.
  • Another bill to lay the groundwork to phase-out the use of natural gas for residential space- or water-heating, and cooking, has been shelved by the author for the remainder of the year.

Still to be determined: whether the former Senate Leader will reinvigorate his for-now bottled-up bill requiring ever-increasing proportions of the state’s electrical generation to be generated by renewable energy sources.

Choosing the marketplace over direct regulations is not an academic exercise. In 2017 the Legislative Analyst found that cap-and-trade would cost one-half to one-quarter as much as direct regulations, such as tougher energy efficiency requirements and higher renewable purchase mandates on utilities. State leaders recognize that choosing the most expensive path means no one will follow.

Loren Kaye, President, California Foundation for Commerce and Education